Financial Statements for September 2005

EX-99 5 portalsept3005financials.htm FINANCIAL STATEMENTS FOR SEPTEMBER 2005 Financial Statements for September 2005

PORTAL RESOURCES LTD.

(formerly Portal de Oro Resources Ltd.)

Consolidated Financial Statements

September 30, 2005

September 30, 2004

and

June 30, 2005

June 30, 2004

June 30, 2003

(An exploration stage company)

NOTICE TO READER

Under National Instrument 51-102, Part 4, subsection 4.3 (3) (a), if an auditor has not performed a review of the interim financial statements, they must be accompanied by a notice indicating that the financial statements have not been reviewed by an auditor.

The accompanying unaudited interim consolidated financial statements of the Company have been prepared by and are the responsibility of the Company’s management.

The Company’s independent auditor has not performed a review of these financial statements in accordance with standards established by the Canadian Institute of Chartered Accountants for a review of interim financial statements by an entity’s auditor.

Portal Resources Ltd.		Trading Symbol: PDO.V
Head Office: Suite 750 – 625 Howe Street		Telephone: 604-629-1929
Vancouver, British Columbia, Canada V6C 2T6		Facsimile: 604-629-1930

PORTAL RESOURCES LTD.

(formerly Portal de Oro Resources Ltd.)

CONSOLIDATED BALANCE SHEETS

(stated in Canadian dollars)

	September 30,		June 30,
	2005	2004	2005	2004
	(Unaudited- prepared by management)	(Unaudited- prepared by management)

ASSETS

Current
Cash and cash equivalents	$ 250,335	$ 357,177	$ 740,098	$ 599,027
Amounts receivable	7,873	21,163	4,432	14,374
Prepaid expenses	28,067	14,695	16,520	6,063
	286,275	393,035	761,050	619,464

Equipment and software (Note 4)	37,747	9,696	41,969	8,172
Mineral rights on unproven properties (Note 5)	1,755,961	661,398	1,544,183	576,033

	$ 2,079,983	$ 1,064,129	$ 2,347,202	$ 1,203,669


LIABILITIES

Current
Accounts payable and accrued liabilities	$ 117,669	$ 36,705	$ 231,480	$ 44,100
Due to related parties (Note 7)	6,106	2,993	10,532	31,890
	123,775	39,698	242,012	75,990

SHAREHOLDERS’ EQUITY


Share capital (Note 6)	2,988,798	1,366,017	2,969,461	1,358,097
Contributed surplus (Note 6)	222,896	113,612	180,493	78,808
Deficit	(1,255,486)	(455,198)	(1,044,764)	(309,226)
	1,956,208	1,024,431	2,105,190	1,127,679

	$ 2,079,983	$ 1,064,129	$ 2,347,202	$ 1,203,669

Going Concern (Note 1)

Approved by the Board of Directors:


Gary Nordin		Bruce Winfield

See notes to the consolidated financial statements

PORTAL RESOURCES LTD.
(formerly Portal de Oro Resources Ltd.)

CONSOLIDATED STATEMENTS OF OPERATIONS AND DEFICIT
(stated in Canadian dollars)

	Three months ended		Years ended
	September 30,		June 30,
	2005	2004	2005	2004	2003
	(Unaudited- prepared by management)	(Unaudited- prepared by management)
	$	$	$	$	$

Revenue	-	-	-	-	-

Expenses
Accounting and audit	12,798	7,491	41,583	14,832	3,000
Amortization	4,222	881	10,171	1,581	-
Bank charges and interest	3,601	1,321	11,267	2,172	235
Consulting and management fees	8,917	171	30,390	3,171	5,500
Foreign exchange	(768)	4,023	(706)	4,894	-
Interest income	(923)	(345)	(3,391)	(3,422)	(3,967)
Investor relations	34,668	9,877	109,064	13,442	-
Legal	1,474	5,492	20,180	1,075	5,396
Office and miscellaneous	15,018	6,426	44,790	17,758	2,738
Rent	4,936	4,936	19,746	8,068	3,600
Project investigation	-	-	8,995	7,470	-
Salaries and benefits	45,212	60,717	243,971	45,586	-
Stock-based compensation (Note 6)	46,238	34,804	103,026	78,808	-
Travel	4,009	7,990	33,366	2,098	-
Transfer agent and filing fees	1,828	2,188	17,446	15,692	7,056
Write-off of mineral property expenses	-	-	-	12,079	-
Valuation allowance for foreign value added tax credit (IVA)	29,492	-	45,640	-	-
Write-off of non-refundable deposit	-	-	-	-	25,000

	210,722	145,972	735,538	225,304	48,558

Net loss for the period	(210,722)	(145,972)	(735,538)	(225,304)	(48,558)

Deficit – beginning of period	(1,044,764)	(309,226)	(309,226)	(83,922)	(35,364)

Deficit – end of period	(1,255,486)	(455,198)	(1,044,764)	(309,226)	(83,922)

Loss per share (Note 2)	$ (0.02)	$ (0.02)	$ (0.08)	$ (0.05)	$ (0.02)

Weighted average number of common shares outstanding	10,811,443	8,542,000	9,445,368	4,386,667	2,320,000

See notes to the consolidated financial statements

PORTAL RESOURCES LTD.
(formerly Portal de Oro Resources Ltd.)

CONSOLIDATED STATEMENTS OF CASH FLOWS
(stated in Canadian dollars)

	Three months ended		Years ended
	September 30,		June 30,
	2005	2004	2004	2004	2003
	(Unaudited- prepared by management)	(Unaudited- prepared by management)
	$	$	$	$	$

Cash provided by (used for):
Operating Activities
Net loss for the period	(210,722)	(145,972)	(735,538)	(225,304)	(48,558)
Items not involving cash:
Stock-based compensation	46,238	34,804	103,026	78,808	-
Write-down of mineral properties	-	-	-	12,079	-
Amortization	4,222	881	10,171	1,581	-

	(160,262)	(110,287)	(622,341)	(132,836)	(48,558)

Changes in non-cash working capital:
Amounts receivable	(3,441)	(6,789)	9,942	(13,525)	(277)
Prepaid expenses	(11,547)	(8,632)	(10,457)	(4,788)	(250)
Accounts payable and accrued liabilities	(113,811)	(7,395)	187,380	39,378	1,227
Due to related parties	(4,426)	(28,897)	(21,358)	(41,899)	(1,035)

	(293,487)	(162,000)	(456,834)	(153,670)	(48,893)

Investing Activities
Purchase of equipment and software	-	(2,405)	(43,968)	(9,753)	-
Mineral rights on unproven properties	(211,778)	(85,365)	(968,150)	(192,235)	-
Acquisition of Portal de Oro (B.V.I.) Ltd. (Note 3)	-	-	-	(122,337)	-

	(211,778)	(87,770)	(1,012,118)	(324,325)	-

Financing Activities
Shares issued for cash	15,502	7,920	1,679,127	947,900	-
Share issue costs	-	-	(69,104)	(35,551)	-

	15,502	7,920	1,610,023	912,349	-

Net cash provided (used) during period	(489,763)	(241,850)	141,071	434,354	(48,893)
Cash – beginning of period	740,098	599,027	599,027	164,673	213,566

Cash – end of period	250,335	357,177	740,098	599,027	164,673


Supplementary information on non-cash transactions
Shares issued to acquire Portal de Oro (B.V.I.) Ltd.	$ -	$ -	$ -	$ 200,000	$ -

See notes to the consolidated financial statements

PORTAL RESOURCES LTD.

(formerly Portal de Oro Resources Ltd.)

Notes to the Consolidated Financial Statements

For the periods ended September 30, 2005 and 2004 (Unaudited – prepared by management)

For the years ended June 30, 2005, 2004 and 2003

(stated in Canadian dollars)

NATURE OF OPERATIONS AND GOING CONCERN

Portal Resources Ltd. (“Portal” or “the Company”, formerly Portal de Oro Resources Ltd. and Gateway Enterprises Ltd.) was incorporated on August 14, 2000 under the Company Act of the Province of British Columbia. The Company was called for trading on the TSX Venture Exchange (“the Exchange”) as a “Capital Pool Company” in May 2001.

On March 15, 2004 the Company completed its Qualifying Transaction (“QT”) under the Capital Pool Company rules of the Exchange when it acquired all of the outstanding shares of Portal de Oro (B.V.I.) Ltd. (“Portal (BVI)”), which through its wholly owned subsidiary El Portal de Oro S.A (“Portal S.A.”) has a 100% interest the Arroyo Verde project in Argentina, in consideration for the issuance of 2,000,000 common shares of the Company at a deemed price of $0.10 per share. All of the consideration shares are subject to a three-year value escrow agreement.

Pursuant to a Special Resolution passed by shareholders January 6, 2004, the Company changed its name from Gateway Enterprises Ltd. to Portal de Oro Resources Ltd. Pursuant to a Special Resolution passed by the shareholders on December 10, 2004, the Company changed its name from Portal de Oro Resources Ltd. to Portal Resources Ltd.

The Company is an exploration stage company whose business activity is the exploration of mineral rights located in Argentina. The Company has not yet determined if any of these rights contain economic mineral reserves and, accordingly, the amounts shown for deferred exploration costs represent costs incurred to date, less write-downs, and do not necessarily reflect present or future values. The recovery of these amounts is dependent upon the discovery of economically recoverable reserves, the ability of the Company to obtain the necessary financing to complete the exploration of the rights, and upon the commencement of future profitable production or, alternatively, upon the Company’s ability to dispose of its interests on an advantageous basis.

In order to maintain future exploration expenditures and cover administrative costs, the Company will need to raise additional financing. Although the Company has been successful in raising funds to date, there can be no assurance that the Company will be able to continue to raise funds in the future in which case the Company may be unable to meet its obligations. Should the Company be unable to realize on its assets and discharge its liabilities in the normal course of business the net realizable value of its assets may be materially less than the amounts recorded on the balance sheet.

SIGNIFICANT ACCOUNTING POLICIES

Basis of presentation and principles of consolidation

These consolidated financial statements have been prepared in accordance with generally accepted accounting principles in Canada (Canadian GAAP). These interim consolidated financial statements do not include in all respects the annual disclosure requirements of generally accepted accounting principles and should be read in conjunction with the most recent annual consolidated financial statements. The differences between those principles and these that would be applied under U.S. generally accepted accounting principles (U.S. GAAP) are disclosed in note 9.

References to the Company are inclusive of the Canadian parent company and its wholly-owned Argentinean subsidiary.

PORTAL RESOURCES LTD.

(formerly Portal de Oro Resources Ltd. and Gateway Enterprises Ltd.)

Notes to the Consolidated Financial Statements

For the periods ended September 30, 2005 and 2004 (Unaudited – prepared by management)

For the years ended June 30, 2005, 2004 and 2003

(stated in Canadian dollars)

SIGNIFICANT ACCOUNTING POLICIES, (Continued)

Financial Instruments

The Company’s financial instruments consist of current assets and current liabilities. The fair value of these instruments approximate their carrying values due to their short-term nature. Financial risk is the risk arising from fluctuations in foreign currency exchange rates. The Company does not use derivative or hedging instruments to reduce its exposure to fluctuations in foreign currency exchange rates.

Cash Equivalents

Cash equivalents consist of highly liquid investments with maturity dates of less than one year that are readily convertible into known amounts of cash. Interest earned is recognized immediately in operations.

Use of Estimates

The preparation of financial statements in conformity with Canadian generally accepted accounting principles requires management to make estimates and assumptions that affect the reported amounts of revenues and expenses during the reporting period. Actual results could differ from these estimates.

Mineral rights

Mineral right acquisition costs and their related exploration costs are deferred until the rights are placed into production or disposed of. These costs will be amortized over the estimated useful life of the rights following the commencement of production, or written-off if the rights are disposed of.

Cost includes the cash consideration and the fair market value of shares issued on acquisition of mineral rights. Rights acquired under option agreements or joint ventures, whereby payments are made at the sole discretion of the Company, are recorded in the accounts at such time as the payments are made. The proceeds from options granted are netted against the cost of the related mineral rights and any excess is applied to operations.

The Company reviews capitalized costs on its mineral rights on a periodic basis and will recognize an impairment in value based upon current exploration results and upon management’s assessment of the future probability of profitable revenues from the rights or from the sale of the rights. Management’s assessment of the right’s estimated current fair market value is also based upon a review of other similar mineral rights transactions that have occurred in the same geographic area as that of the rights under review.

Equipment and software

Equipment and software are recorded at cost. Amortization is provided for using the straight-line method at the following annual rates: Computer equipment – 30%; Computer software – 50%, Furniture and fixtures – 20%, Vehicles – 20%.

Share Capital

Common shares issued for non-monetary consideration are recorded at their fair market value based upon the trading price of the Company’s shares on the TSX Venture Exchange.

Stock Option Plan

Effective July 1, 2003, the Company has early adopted the recommendation of the Canadian Institute of Chartered Accountants in accounting for employee stock option plans. Options granted to employees and non-employees are accounted for using the fair value method where compensation expense is calculated using the Black-Scholes options pricing model.

PORTAL RESOURCES LTD.

(formerly Portal de Oro Resources Ltd.)

Notes to the Consolidated Financial Statements

For the periods ended September 30, 2005 and 2004 (Unaudited – prepared by management)

For the years ended June 30, 2005, 2004 and 2003

(stated in Canadian dollars)

SIGNIFICANT ACCOUNTING POLICIES, (Continued)

Stock-based Compensation

The Company records compensation expense for stock options granted at the time of their vesting using the fair value method. The adoption of this accounting policy for stock-based compensation has been applied prospectively to all stock options granted subsequent to January 1, 2003, prior to which the Company followed the policy of disclosing on a pro-forma basis only the effect of accounting for stock options granted to employees and directors on a fair value basis.

The proceeds received by the Company on the exercise of options are credited to share capital.

Loss per share

Loss per share has been calculated using the weighted-average number of common shares outstanding during the period. Fully diluted loss per share amounts are not presented, as they are anti-dilutive.

Income Taxes

The Company accounts for the tax consequences of future tax assets and liabilities attributable to temporary differences between the financial statement carrying amounts of existing assets and liabilities and their tax bases using tax rates expected to apply to taxable income in the years in which those temporary differences are expected to be settled. When the future realization of income tax assets does not meet the test of being more likely than not to occur, a valuation allowance in the amount of the potential future benefit is taken and no asset is recognized. The Company has taken a valuation allowance for the full amount of all potential net tax assets.

Comparative figures

Certain comparative figures have been reclassified to conform with the presentation adopted in the current period.

ACQUISTION OF PORTAL DE ORO (B.V.I.) LTD.

On March 15, 2004 the Company acquired all of the outstanding shares of Portal de Oro (B.V.I.) Ltd. (“Portal BVI”) whereby the Company acquired 100% of the Arroyo Verde project in Argentina, owned by El Portal de Oro S.A, a wholly owned subsidiary of Portal BVI. Under the purchase agreement, the Company acquired Portal BVI for 2,000,000 common shares of the Company valued at $0.10 per share. The Company incurred acquisition costs of $122,372. The acquisition has been accounted for using the purchase method. The allocation of the purchase price is summarized as follows:

Purchase price:

Shares issued

200,000

Acquisition costs

122,372

322,372

Assets acquired:

Cash

Mineral property

395,877

395,912

Liabilities assumed:

Current liabilities

(73,540)

Net assets acquired

$ 322,372

PORTAL RESOURCES LTD.

(formerly Portal de Oro Resources Ltd.)

Notes to the Consolidated Financial Statements

For the periods ended September 30, 2005 and 2004 (Unaudited – prepared by management)

For the years ended June 30, 2005, 2004 and 2003

(stated in Canadian dollars)

EQUIPMENT AND SOFTWARE

	September 30,				June 30,
	2005			2004
	(Unaudited – prepared by management)			(Unaudited – prepared by management)	2005	2004

	Cost	Accumulated amortization	Net book value	Net book value	Net book value	Net book value
	$	$	$	$	$	$
Computer equipment	10,980	5,043	5,937	8,960	6,760	7,289
Computer software	17,796	7,189	10,607	736	12,758	883
Furniture & fixtures	1,701	255	1,446	-	1,531	-
Vehicles	23,244	3,487	19,757	-	20,920	-
	56,804	15,974	37,747	9,696	41,969	8,172

MINERAL RIGHTS ON UNPROVEN PROPERTIES

The Company’s mineral properties are all located in. A breakdown of carrying values by property and significant expenditure category is as follows:

	Arroyo Verde	San Rafael		Project Investigation		Total
Total as at June 30, 2003	$ -	$ -		$ -		$ -

Land acquisition & holding costs	399,079	63,018		4,989		467,086
Environmental	2,172	-		-		2,172
Geology	43,535	17,984		44,262		105,781
Surface geochemistry	2,894	-		3,300		6,194
Other	49	5,873		957		6,879
Total expenditures	447,729	86,875		53,508		588,112
Property write-offs	(49)		(5,873)		(6,157)		(12,079)
Total as at June 30, 2004	447,680	81,002		47,351		576,033

Land acquisition & holding costs	48,083	120,421		1,739		170,243
Environmental	-	11,830		-		11,830
Geology	307,124	64,159		14,434		385,717
Geophysics	175,255	-		-		175,255
Surface geochemistry	24,649	4,319		101		29,069
Drilling	196,036	-		-		196,036
Total expenditures	751,147	200,729		16,274		968,150
Total as at June 30, 2005	1,198,827	281,731		63,625		1,544,183

Land acquisition & holding costs	1,691	21		-		1,712
Geology	92,801	882		1,581		95,264
Surface geochemistry	28,527	-		-		28,527
Drilling	86,275	-		-		86,275
Total expenditures	209,294	903		1,581		211,778
Total as at September 30, 2005	$ 1,408,121	$ 282,634		$ 65,206		$ 1,755,961

PORTAL RESOURCES LTD.

(formerly Portal de Oro Resources Ltd.)

Notes to the Consolidated Financial Statements

For the periods ended September 30, 2005 and 2004 (Unaudited – prepared by management)

For the years ended June 30, 2005, 2004 and 2003

(stated in Canadian dollars)

MINERAL RIGHTS ON UNPROVEN PROPERTIES, (Continued)

Arroyo Verde

On November 27, 2003, Portal S.A. signed an option to acquire a 100% interest in a series of mining rights in Chubut province of Argentina. Under the terms of the agreement the Company’s payment requirements are as follows:

US$

Within 60 days of reviewing technical data

$ 1,000 (paid)

On signing of the agreement

$ 4,000 (paid)

On or before June 1, 2004

$ 5,000 (paid)

On or before December 1, 2004

$ 20,000 (paid)

On or before December 1, 2005

$ 40,000

On or before December 1, 2006

$ 60,000

On or before December 1, 2007

$ 80,000

On or before December 1, 2008 or upon receipt of a feasibility study, the Company must pay an advance royalty payment of US$1 for each ounce of gold equivalent in the measured and indicated resources with a minimum of US$100,000 and a maximum of US$250,000. This advance royalty can be applied against subsequent royalty obligations. The vendor retains a 2% net smelter royalty that the Company can purchase 1% of, at any time, for US$1,000,000.

San Rafael

The properties in the San Rafael project have been acquired through two separate option agreements.

San Pedro

On June 18, 2004, Portal S.A. signed an option to acquire a 100% interest in a series of mining rights in Mendoza province of Argentina. Under the terms of the agreement the Company’s payment requirements to exercise the option are as follows:

US$

On signing of the agreement

$ 30,000 (paid)

On or before June 18, 2005

$ 20,000 (paid)

On or before June 18, 2006

$ 30,000

On or before June 18, 2007

$ 40,000

On or before June 18, 2008

$ 50,000

On or before June 18, 2009

$ 60,000

On or before June 18, 2010

$200,000

On or before June 18, 2011

$200,000

On or before June 18, 2012

$200,000

PORTAL RESOURCES LTD.

(formerly Portal de Oro Resources Ltd.)

Notes to the Consolidated Financial Statements

For the periods ended September 30, 2005 and 2004 (Unaudited – prepared by management)

For the years ended June 30, 2005, 2004 and 2003

(stated in Canadian dollars)

MINERAL RIGHTS ON UNPROVEN PROPERTIES, (Continued)

Rio de la Plata

US$

On signing of the agreement

$ 15,000 (paid)

On or before April 9, 2005

$ 15,000 (paid)

On or before April 9, 2006

$ 15,000

On or before April 9, 2007

$ 50,000

On or before April 9, 2008

$ 70,000

On or before April 9, 2009

$100,000

The Company is obligated to make the initial three annual payments of $15,000. Should the Company wish to develop any of the four areas defined in the agreement, during the term of the option, it must pay the sum of US$50,000 for each area so designated. The Company would then form a new 100% owned subsidiary to which the mining rights in that designated area would be transferred. The new subsidiary would be subject to a 15% to 20% net profit interest to the owner. The Company has the right to purchase 10% of the net profits interest at any time for the sum of US$1,000,000.

SHARE CAPITAL

Authorized

100,000,000 Common Shares without par value, 100,000,000 Preferred shares issuable in series

Issued

	Number	Price per share	Amount

Private placement	1,120,000	$ 0.09	$ 100,800
Public offering	1,200,000	0.18	216,000
Share issue costs	-		(71,052)
Balance – June 30, 2003	2,320,000		245,748

Private placement	1,000,000	0.15	150,000
Private placement	3,170,000	0.25	792,500
On exercise of options	30,000	0.18	5,400
On acquisition of Portal BVI	2,000,000	0.10	200,000
Share issue costs	-		(35,551)
Balance – June 30, 2004	8,520,000		1,358,097

Private placement	1,456,000	0.75	1,092,000
Private placement	768,943	0.75	576,707
On exercise of options	54,000	0.19	10,420
Transfer upon exercise of options	-		1,341
Share issue costs	-		(69,104)
Balance – June 30, 2005	10,798,943		2,969,461

On exercise of options	75,000	0.21	15,502
Transfer upon exercise of options	-		3,835
Balance – September 30, 2005	10,873,943		$ 2,988,798

PORTAL RESOURCES LTD.

(formerly Portal de Oro Resources Ltd.)

Notes to the Consolidated Financial Statements

For the periods ended September 30, 2005 and 2004 (Unaudited – prepared by management)

For the years ended June 30, 2005, 2004 and 2003

(stated in Canadian dollars)

SHARE CAPITAL, (Continued)

Escrowed Shares

A total of 3,690,000 common shares issued were placed in escrow and their release from escrow is subject to the terms of an agreement between the Company, its stock transfer agent and the beneficial owners of the escrowed shares. These shares are to be released in stages within three years of the completion date of the Qualifying Transaction. On March 15, 2004, 369,000 of the escrowed shares were released, on September 15, 2004, 553,500 were released, on March 15, 2005 553,500 were released and on September 15, 2005 553,500 were released. As at September 30, 2005, there are 1,660,500 common shares remaining in escrow.

Stock Options

The Company has a stock option plan as described in the most recent annual financial statements of the Company. The Company accounts for its grants in accordance with the fair value method of accounting for stock-based compensation.

A summary of changes to stock options outstanding is as follows:

	September 30,		June 30,
	*(Unaudited-prepared by management)* 2005		2005		2004
		Weighted- Average		Weighted- Average		Weighted-Average
	Number of shares	Exercise Price	Number of shares	Exercise Price	Number of shares	Exercise Price
Outstanding at beginning of year	1,103,000	$ 0.43	960,000	$ 0.32	232,000	$ 0.18
Granted under plan	80,000	$ 0.68	347,000	$ 0.84	820,800	$ 0.34
Exercised	(75,000)	$ 0.21	(54,000)	$ 0.19	(30,000)	$ 0.18
Forfeited or cancelled	-	-	(150,000)	$ 0.79	(62,800)	$ 0.18
Outstanding at end of period	1,108,000	$ 0.46	1,103,000	$ 0.43	960,000	$ 0.32

Stock-based Compensation

The Company recorded stock-based compensation expense for stock options of $46,238 in the quarter ended September 30, 2005 (2004 - $34,804) and $103,026 for the year ended June 30, 2005 (2004 - $78,808). These costs were offset to contributed surplus of $222,896.

For all stock options that have been granted, the Company will recognize stock-based compensation as the options vest and will expense an additional $49,644 in the remainder of the fiscal year. The remaining $818 will be expensed in the first quarter of the fiscal year ended June 30, 2007.

PORTAL RESOURCES LTD.

(formerly Portal de Oro Resources Ltd.)

Notes to the Consolidated Financial Statements

For the periods ended September 30, 2005 and 2004 (Unaudited – prepared by management)

For the years ended June 30, 2005, 2004 and 2003

(stated in Canadian dollars)

SHARE CAPITAL, (Continued)

On August 17, 2005, the Company entered into an agreement with Coal Harbor Communications Inc. (“Coal Harbor”) for investor relations and marketing services. Under the terms of the agreement, Coal Harbor will receive a fee of $5,000 per month for a one-year term and 50,000 share purchase options of the Company. On August 26, 2005, the company issued the 50,000 stock options at an exercise price of $0.70. These options have a term of one year and vest in equal amounts every three months for one year. The fair value of these options was estimated at $0.14 per option at grant date.

On September 15, 2005, the Company granted an employee 30,000 share purchase options with an exercise price of $0.64. These options have a term of five years and vest in equal amounts every three months for one year. The fair value of these options was estimated at $0.28 per option at grant date.

The fair value of the options granted was estimated using the Black-Scholes option-pricing model, based on the following assumptions:

	Sept. 30, 2005	Sept. 30, 2004	June 30, 2005	June 30, 2004

Stock compensation	$ 46,238	$ 34,804	$ 103,026	$ 78,808

Risk-free interest rate	3.4%	4%	4%	4%
Expected stock price volatility	49% - 62%	72% – 76%	72%	76%
Expected option life in years	1-3 years	3 years	3 years	3 years
Expected dividend yeild	Nil	Nil	Nil	Nil

Option-pricing models require the input of highly subjective assumptions regarding the expected volatility and expected life. Changes in assumptions can materially affect the fair value of the Company’s stock options at the date of grant.

Stock options outstanding as at September 30, 2005 are as follows:

Number	Exercise Price	Expiry Date
48,800	$ 0.18	May 28, 2006
632,200	$ 0.25	March 15, 2009
50,000	$ 0.75	June 18, 2009
70,000	$ 0.77	December 23, 2009
227,000	$ 0.86	April 14, 2010
50,000	$ 0.70	August 26, 2006
30,000	$ 0.64	September 15, 2010
1,108,000

Warrant outstanding as at September 30, 2005are as follows:

Number	Exercise Price	Expiry Date
728,000	$ 0.90	December 20, 2005
384,471	$ 0.90	May 5, 2006
1,112,471

PORTAL RESOURCES LTD.

(formerly Portal de Oro Resources Ltd.)

Notes to the Consolidated Financial Statements

For the periods ended September 30, 2005 and 2004 (Unaudited – prepared by management)

For the years ended June 30, 2005, 2004 and 2003

(stated in Canadian dollars)

RELATED PARTY TRANSACTIONS

Payments to related parties were made in the normal course of operations and were valued at fair value as determined by management. Amounts due to or from related parties are unsecured, non-interest bearing and due on demand.

For the three month period ended September 30, 2005 and 2004 (Unaudited)

During the three months ended September 30, 2005, the Company paid or accrued to pay another public company related by certain common directors $18,711 (2004 - $18,945) for the shared rent of office space and services and expense reimbursements and as at September 30, 2005 owes this company an aggregate of $5,571 (June 30, 2005 - $5,423).

During the three months ended September 30, 2005, the Company paid or accrued to pay a private company with a director in common with the Company an aggregate of $535 (2004 - $54) for fees and expense reimbursements and as at September 30, 2005 owes this company an aggregate of $535 (June 30, 2005 – $803).

As at September 30, 2005 the Company owes certain directors an aggregate of $Nil (June 30, 2005 - $5,108) for expense reimbursements

For the years ended June 30, 2004, 2003, 2002

The Company paid another public company related by certain common directors $63,828 (2004 - $20,750; 2003 - $3,600) for the shared rent of office space and services and as at June 30, 2005 owes this company an aggregate of $5,423 (2004 - $18,504; 2003 - $nil).

The Company paid or accrued to pay a private company with a director in common with the Company an aggregate of $6,382 (2004 - $4,759; 2003 - $1,775) for fees and expense reimbursements and during 2004 paid $5,350 for deferred acquisition costs. As at June 30, 2005 owes this company an aggregate of $803 (2004 - $nil; 2003 - $11).

As at June 30, 2005 the Company owes certain directors an aggregate of $5,108 (2004 - $13,386; 2003 - $238) for expense reimbursements.

INCOME TAXES

A reconciliation of income taxes at statutory rates with reported taxes is as follow:

	2005	2004		2003
Loss before income taxes	$ (735,538)		$ (225,304)		$ (48,558)

Expected income taxes (recovery)	$ (261,998)		$ (84,759)		$ (19,229)
Non-deductible (deductible) expenses for tax purposes	25,054	(7,923)			(5,627)
Unrecognized benefit on non-capital losses	236,944	92,682		24,856
Total income taxes (recovery)	$ -	$ -		$ -

PORTAL RESOURCES LTD.

(formerly Portal de Oro Resources Ltd.)

Notes to the Consolidated Financial Statements

For the periods ended September 30, 2005 and 2004 (Unaudited – prepared by management)

For the years ended June 30, 2005, 2004 and 2003

(stated in Canadian dollars)

INCOME TAXES, (Continued)

The significant components of the Company’s future income tax assets for Canadian purposes are as follows:

	2005	2004		2003
Future income tax assets
Non-capital loss carryforwards	$ 307,218	$ 372,917		$ 126,552
Share issue costs	27,290	42,652		28,422
Equipment	10,855	1,851		-
Future income tax assets before valuation allowance	345,363	417,420		154,974
Less: valuation allowance	(345,363)		(417,420)		(154,974)
Net future income tax assets	$ -	$ -		$ -

The Company has incurred losses for Canadian income tax purposes of approximately $862,488, which can be carried forward to reduce taxable income in future years: These losses will expire as follows:

2007	$ 37,865
2008	25,919
2009	62,768
2010	160,595
2011	575,341
	$ 862,488

In addition, the Company has non-capital loss carry forwards and related resource property expenditures that are available to reduce income in future years in Argentina. The benefits of these future tax assets have not been recorded in the accounts of the Company.

DIFFERENCES BETWEEN CANADIAN AND UNITED STATES GENERALLY ACCEPTED ACCOUNTING PRINCIPLES (GAAP)

Under Canadian GAAP for junior mining exploration companies, mineral exploration expenditures are deferred on prospective mineral rights until such time as it is determined that further exploration work is not warranted, at which time the mineral right costs are written-off. Under U.S. GAAP, all exploration expenditures are expensed until an independent feasibility study has determined that the mineral rights are capable of economic commercial production. The following items (a) to (g) provide a summary of the impact of these financial statements that would result form the application of U.S. accounting principles to deferred mineral rights.

	Three months ended		Years ended
	September 30,		June 30,
	2005	2004	2005	2004	2003
	(Unaudited-prepared by management)
	$	$	$	$	$
a) Assets
Deferred Mineral Rights Costs
Deferred mineral right costs following
Canadian GAAP:	1,755,961	661,398	1,544,183	576,033	-
Less deferred mineral rights costs	(1,755,961)	(661,398)	(1,544,183)	(576,033)	-
Deferred mineral rights costs following
U.S. GAAP	-	-	-	-	-

PORTAL RESOURCES LTD.

(formerly Portal de Oro Resources Ltd.)

Notes to the Consolidated Financial Statements

For the periods ended September 30, 2005 and 2004 (Unaudited – prepared by management)

For the years ended June 30, 2005, 2004 and 2003

(stated in Canadian dollars)

DIFFERENCES BETWEEN CANADIAN AND UNITED STATES GENERALLY ACCEPTED ACCOUNTING PRINCIPLES (GAAP) (Continued)

	Three months ended		Years ended
	September 30,		June 30,
	2005	2004	2005	2004	2003
	(Unaudited-prepared by management)
	$	$	$	$	$
b) Operations
Net loss following Canadian GAAP	(210,722)	(145,972)	(735,538)	(225,304)	(48,558)
Deferred mineral rights costs expensed
under U.S. GAAP	(211,778)	(85,365)	(968,150)	(576,033)	-

Net loss under U.S. GAAP	(422,500)	(231,337)	(1,703,688)	(801,337)	(48,558)

c) Deficit
Closing deficit under Canadian GAAP	(1,255,486)	(455,198)	(1,044,764)	(309,226)	(83,922)
Adjustment to deficit for accumulated
deferred mineral rights expensed under
U.S. GAAP, net of income items	(1,755,961)	(661,398)	(1,544,183)	(576,033)	-

Closing deficit under U.S. GAAP	(3,011,447)	(1,116,596)	(2,588,947)	(885,259)	(83,922)
	-

d) Cash Flows – Operating Activities
Cash applied to operations under
Canadian GAAP	(293,487)	(162,000)	(456,834)	(153,670)	(48,893)
Add net loss following Canadian GAAP	210,722	145,972	735,538	225,304	48,558
Add non cash mineral rights expensed under U.S. GAAP	-	-	-	275,540	-
Less net loss following U.S. GAAP	(422,500)	(231,337)	(1,703,688)	(801,337)	(48,558)
Less mineral rights costs expensed under Canadian GAAP	-	-	-	(12,079)	-
Cash applied to operations under U.S.
GAAP	(505,265)	(247,365)	(1,424.984)	(468,242)	(48,893)

e) Cash Flows – Investing Activities
Cash applied under Canadian GAAP	(211,778)	(87,770)	(1,012,118)	(324,325)	-
Add mineral right costs expensed under
U.S. GAAP	211,778	85,365	968,150	314,572	-
Cash applied under U.S. GAAP	-	(2,405)	(43,968)	(9,753)	-

PORTAL RESOURCES LTD.

(formerly Portal de Oro Resources Ltd.)

Notes to the Consolidated Financial Statements

For the periods ended September 30, 2005 and 2004 (Unaudited – prepared by management)

For the years ended June 30, 2005, 2004 and 2003

(stated in Canadian dollars)

DIFFERENCES BETWEEN CANADIAN AND UNITED STATES GENERALLY ACCEPTED ACCOUNTING PRINCIPLES (GAAP) (Continued)

OTHER DIFFERENCES BETWEEN CANADIAN AND U.S. GAAP

Stockholders’ Equity

Common Stock

Under U.S. GAAP applied to the financial statements of the Company, compensation expense and related assumptions must be disclosed for all stock options granted, requiring the Company to utilize either the intrinsic value method or the fair-value based methods of accounting for stock-based compensation. Under Canadian GAAP, no such expense or related disclosures were required to be recognized prior to 2002.

No stock options were issued or vested during 2002, therefore the Company’s accounting treatment and related disclosures for 2002 were materially congruent with the approach followed under APB 25. In 2003 however, the Company, if required to report under U.S. GAAP, would have elected to apply the provisions of SFAS 123 and to account for all options issued to employees and consultants utilizing the fair-value based method. This approach would have been consistent with new Canadian GAAP standards applied in 2003. As a further similarity, both U.S. and Canadian standards for recording stock-based compensation permit the Company to adopt a fair value methodology on a prospective basis, which the Company has adopted.

Loss per Share

Under Canadian GAAP, shares held in escrow and contingently issuable are included in the calculation of loss per share, however under U.S. GAAP, these shares are excluded until the shares are released for trading.

The following is a reconciliation of the numerators and denominators of the basic and diluted loss per share calculations. Diluted loss per share is not presented as it is anti-dilutive.

	Three months ended		Years ended
	September 30,		June 30,
	2005	2004	2005	2004	2002
	(Unaudited-prepared by management)
	$	$	$	$	$
Numerator: Net loss for the period
under U.S. GAAP	(422,500)	(231,337)	(1,703,688)	(801,337)	(48,558)
Denominator: Weighted-average
number of shares under Canadian:
and U.S. GAAP	10,811,443	8,542,000	9,445,368	4,386,667	2,320,000
Adjustment required under U.S.
GAAP (escrow shares)	-	-	-	(720,000)	(1,120,000)

Weighted-average number of shares
under U.S. GAAP	10,811,443	8,542,000	9,445,368	3,666,667	1,200,000

Basic and fully diluted loss per share
under U.S. GAAP	$ (0.04)	$ (0.03)	$ (0.18)	$ (0.22)	$ (0.04)